Following four days of hearings, the Surface Transportation Board announced
on March 17 that it was placing a 15-month moratorium on all rail mergers,
effectively halting the proposed Burlington Northern Santa Fe-Canadian National
combination for more than a year.

Just hours after the Board issued the ruling, BNSF and CN filed petitions
with the STB requesting it overturn the moratorium, and also announced they
would go to court to force the STB to overturn its decision. On March 31,
BNSF filed a lawsuit in the U.S. Court of Appeals for the District of Columbia
Circuit to stay the STB order, and on April 12, CN did the same.

The Brotherhood of Locomotive Engineers endorsed the proposed merger
after securing landmark job protections and other benefits for its members.

In placing the 15 month freeze on all rail mergers, the Board stated
part of its intent was to prevent another round of large rail mergers that
could have occurred in response to the $6 billion BNSF-CN combination, causing
instability throughout the industry.

"The Board noted that the railroad industry has consolidated aggressively
in recent years, with only six large railroads remaining in the United States
and Canada," the Board stated in its March 17 ruling.

"But merger implementation has not typically gone smoothly, and
indeed the railroad industry and the shipping public have not yet fully
recovered from the service disruptions associated with the previous round
of mergers.

"Additionally, the testimony at the hearing confirmed the Board's
perception that a BNSF/CN combination would more than likely instigate,
in the very near future, responsive mergers involving each of the other
four large railroads."

Senators welcomed the moratorium at a hearing of the Senate Commerce
subcommittee on surface transportation.

"As the railroads have become larger, the mergers have become more
complex and difficult," said Senate Majority Leader Trent Lott (R-MS)
in a wire service report. "In the short term, it appears to me that
it has drained financial resources from the railroads and... eroded service
gains and efficiencies at various points."

CN's President Paul Tellier reacted angrily to the ruling, calling it
unlawful and unfair.

"The STB's decision is not only unauthorized by Congress, it is
also a de facto amendment... of the STB's regulations, applied retroactively
to prevent the filing of the CN/BNSF application and a subsequent decision
on the merits by the STB," Tellier said. "The decision's illegality
is compounded by its blatant unfairness."

Robert D. Krebs, BNSF chairman and chief executive said: "If Chairwoman
Morgan's radical decision stands, the effect would be something unheard
of in any industry.

"For a period of 15 months, industry participants will be denied
the opportunity to realize service and efficiency improvements that a carefully
conceived and well-executed combination can provide shippers, shareholders,
employees and the public," Krebs concluded.

The March 17 decision by the board was cheered by other railroads and
by many shippers.

"In our view, (the) decision was made in the best interest of the
railroad industry," Union Pacific Railroad said in a statement issued
shortly after the decision was issued. "The STB decision takes a big
step towards stabilizing the industry. UP plans to actively participate
in the rule-making proceeding."

Ed Emmett, president of the National Industrial Transportation League,
which represents major shippers, said his reaction was one more of disappointment
and puzzlement. "This decision appears to have been made more out of
confusion, not of purpose."

A former Interstate Commerce Commission member, Emmett said the rule-making
could have been carried out simultaneously with consideration of the merger.
"The STB is always accused of not taking the side of shippers, and
I think the agency and some observers may wrap this in the mantle of a shipper
friendly decision, when in fact it was done more because of the other Class
1 railroads," he said.